The Engine Division provides engines for the Final Assembly Division of a company. The standard unit costs for the Engine Division are as follows: $\begin{array} { l }
\text {Direct materials }&\$600\
\text { Direct labor}&1,200\
\text {Variable overhead }&300\
\text {Fixed overhead }&150\
\text { Market price per unit}&2,730\
\end{array}$
What is the transfer price based on variable product costs plus a fixed fee of $210?
A)$210
B)$1,800
C)$2,100
D)$2,310

Question

The Engine Division provides engines for the Final Assembly Division of a company. The standard unit costs for the Engine Division are as follows: $\begin{array} { l  }
 \text {Direct materials }&\$600\
 \text { Direct labor}&1,200\
 \text {Variable overhead }&300\
 \text {Fixed overhead }&150\
 \text { Market price per unit}&2,730\
\end{array}$
 What is the transfer price based on variable product costs plus a fixed fee of $210?
A)$210
B)$1,800
C)$2,100
D)$2,310

Quizplus · Accepted Answer

The transfer price is calculated by adding the variable costs (direct materials, direct labor, and variable overhead) to the fixed fee. Variable costs are $600 + $1,200 + $300 = $2,100. Adding the fixed fee of $210 gives a transfer price of $2,310.

The Engine Division Provides Engines for the Final Assembly Division